On Thursday (January 2), during the Asian market's early session, spot Gold fluctuated in a narrow range, currently trading around $2,623.38 per ounce. On Tuesday, Gold prices rose by 0.72%, closing at $2,624.28 per ounce, contributing to a 27% increase in Gold prices for 2024, marking the largest annual increase since 2010, driven by safe-haven demand and rate cuts by central banks; however, market sentiment may become more cautious, depending on policy shifts during Trump's second presidential term. Additionally, the USD reached a two-year high on Tuesday, while the U.S. 10-Year Treasury Notes Yield recorded its best annual gain in two years, causing some concern for Gold’s resistance.

Japan and New Zealand will continue to be closed on Thursday, which may limit trading space in the Asian market. The European and American markets generally resume trading, and this trading day will also see the release of the final January Manufacturing PMI for European and American countries, which investors need to pay attention to, with a focus on the number of ongoing unemployment claims in the USA for the week ending December 21. Furthermore, pay attention to news related to geopolitical situations.

Strong purchases by central banks, geopolitical uncertainty, and loose monetary policies have driven safe-haven Gold to continuously set record highs in 2024, reaching a historical high of $2,790.15 on October 31.

Analysts expect the factors supporting Gold prices in 2024 to persist into 2025, although they also mentioned potential resistance from Trump's policies, which could stimulate inflation and slow down the Fed's rate cuts.

Nicky Shiels, the Metals Strategy Director at MKS PAMP SA, said: "Gold is in a long-term bull market, but the trend in 2025 will not be as one-sided as in 2024."

Silver also recorded its best year since 2020, with a cumulative increase of nearly 22% in 2024. Platinum and Palladium saw annual declines, with drops exceeding 8% and 17%, respectively.

Mulqueen from Citibank believes that Silver prices will rise to $36 per ounce due to significant market shortages and the Fed's rate cuts in 2025. He pointed out that due to adverse factors related to industrial demand growth in 2025, Silver's performance is expected not to exceed that of Gold.

The USD rose 0.41% to 108.43 on Tuesday, reaching a session high of 108.58, the highest level since November 2022. The dollar has risen against nearly all major currencies with an annual increase of about 7%, as the Federal Reserve maintains higher interest rates than other central banks, leading the dollar to outperform other currencies.

With inflation rates still above the Federal Reserve's 2% annual target, traders have adjusted their expectations, believing the Fed will take a slow and cautious approach to further interest rate cuts next year.

Analysts also expect President-elect Trump to introduce policies including deregulation of businesses, tax cuts, increased tariffs, and measures against illegal immigration to stimulate economic growth and increase price pressures next year. This has led to higher U.S. Treasury yields and increased demand for the dollar. However, the prospects of Trump's policies also tend to boost safe-haven sentiment, providing support for Gold prices, which is why Gold prices rose along with the dollar on Tuesday.

Lee Hardman, a senior currency analyst at Mitsubishi UFJ Financial Conglomerates, stated, "U.S. Treasury yields have adjusted to higher levels to reflect the potential inflation impacts of the incoming Trump administration's policy agenda, including increased tariffs, tightened immigration policies, and continued loose fiscal policies."

Weak growth prospects outside the USA, escalating geopolitical tensions in the Middle East, and the ongoing Russia-Ukraine war have increased demand for the dollar this year.

Analysts at Action Economics stated in a report that the dollar is being boosted by "heightened concerns over growth in other regions amid geopolitical risks."

On Tuesday, U.S. Treasury yields reversed course from a decline to an increase amid light trading, reversing much of the downward trend observed during the session, as investors lacked confidence in market direction while awaiting changes under the incoming Trump administration on the final day of 2024. The bond market is closed on Wednesday for New Year's Day.

Prior to the latest price drop, market participants had been Buying Treasury Bonds, as this month's large sell-off pushed the benchmark 10-Year yield to about a six-month high just days ago.

On Tuesday, the U.S. 10-Year Treasury Notes Yield rose by 3.4 basis points to 4.579%. Since the beginning of 2024, this yield has increased by over 60 basis points, marking the best annual increase in two years. The yield reached 4.7390% at the end of April, the highest level of 2024.

The peak in December was 4.641% set on December 26, a new high in over six months, as the market expected greater inflation pressures in 2025 under the leadership of newly elected Republican President Trump, along with more tariffs and tax cuts.

As January 20, the date Trump takes office, approaches, investors are starting to focus on how bond trends will be in 2025, given that the new Republican government is expected to increase fiscal deficits, necessitating the issuance of more Treasury Bonds.

Torsten Slok, chief economist and partner at Apollo Global Management, wrote in his daily blog on Tuesday that the term premium, which is the expected excess return of holding longer-term U.S. Treasuries compared to short-term bonds, has increased by 75 basis points over the past three months.

Slok stated: "In other words, the 10-year yield is now 75 basis points higher than the return that would be expected from changes anticipated by the Federal Reserve, which likely reflects market concerns about the sustainability of U.S. finances."

"Additionally, with the significant decrease in the utilization of the Federal Reserve's reverse repurchase agreement (RRP) mechanism and a large increase in the issuance of short-term debt in 2024 (which needs to be rolled over into longer maturities), the risks of greater volatility in the interest rate market in 2025 are rising."

At the shorter end of the curve, the two-year yield, which is more sensitive to the outlook for policy rates, remained flat at 4.252%. This yield had touched a low of about 4.217% during trading on Tuesday.

At the beginning of 2024, the two-year yield was 4.328%, and by the end of the year, it stood at 4.254%, a decline of about 7 basis points. This decrease is not surprising given that the Federal Reserve initiated a loosening cycle in September.

Data shows that the U.S. Federal Housing Finance Agency (FHFA) house price Index soared by 0.7% to 430.6 points in September, and then rose again by 0.4% to 432.3 points in October, with Treasury Notes yield narrowing the decline. According to Action Economics, this marks the fifth consecutive month of increases after remaining flat in May, and the index has not experienced a decline since August 2022.

In other aspects of the Treasury market, the U.S. yield curve has steepened, with the spread between the two-year and ten-year yields reaching 34.3 basis points, the steepest since May 2022. It was reported at 32.9 basis points in Tuesday's late session, up from 28.7 basis points earlier on Monday.

During a loosening cycle, the curve typically becomes steeper since the rise in short-term yields is suppressed, which generally reflects expectations of lower interest rates.

The latest Interest Rates futures market shows that traders believe there is an 89% chance of pausing rate cuts in January. Calculations from the London Stock Exchange Group (LSEG) indicate that expectations for rate cuts in the U.S. by 2025 are only 47 basis points, roughly equivalent to two rate cuts of 25 basis points each.

In terms of geopolitical situation, according to Palestinian media, on January 1, local time, the Israeli army launched attacks on multiple areas in the Gaza Strip, resulting in at least 25 deaths.

On January 1, the Russian Defense Ministry stated that on the evening of January 1, Russian air defense forces shot down over thirty Ukrainian drones over regions including Belgorod, Kursk, Voronezh, Bryansk, and Rostov. The Russian Aviation Transport Agency reported that temporary control measures were implemented at Kaluga, Saransk, Penza, and Saratov airports.

On January 1, the Ukrainian Air Force reported that since the evening of December 31, 2024, the Russian army has launched a total of 111 drones at Ukraine, of which the Ukrainian air defense forces shot down 63. The National Bank of Ukraine indicated that a roof of one of its buildings caught fire due to falling drone debris, but the fire was subsequently extinguished, and all operations and services of the National Bank of Ukraine are functioning normally.

In terms of economic data, at 21:30 Beijing time, the U.S. Department of Labor will announce the number of initial jobless claims for the week ending December 28, with the market expecting 0.224 million people, up from a previous value of 0.219 million. Investors need to pay close attention; if the data meets or exceeds expectations, it is likely to be bearish for Gold prices; conversely, if the data is worse than anticipated, it may provide some short-term upward momentum for Gold prices.

(Spot gold daily chart, source: E-Huitong)

As of 07:52 Beijing time, the spot Gold is currently quoted at 2623.30 USD/ounce.